Illuminated skyscrapers stand in the central business district at sunset in Beijing, China on November 13, 2023.
Vcg | Visual China Group | Getty Images
Demand from new food and beverage brands, niche international fashion brands and electric car makers is driving interest in stores at the mall, according to JLL.
The company expects demand to continue throughout the year, leading to rent increases that are well below pre-pandemic levels.
Commercial real estate, which includes office buildings and shopping malls, accounts for only a small portion of China's overall real estate market.
Office and commercial property sales rose 15% and 17% year-over-year in January and February, respectively, on a floor area basis, according to Wind Information.
In contrast, the amount of floor space sold for residential properties during the same period fell by nearly 25%, the data showed. Both commercial and residential sales were down for much of last year, according to Wind.
Travel restrictions due to the coronavirus pandemic have reduced demand for commercial property in China, in line with the global trend, but the Chinese economy has taken longer than expected to recover from the pandemic amid a broader downturn in the property market.
Joe Kwan, Singapore-based managing partner of Raffles Family Office, said in an interview last week that commercial property prices in China are approaching attractive buying levels.
“We have an internal timeline and forecast of how much the valuation would have to fall to become attractive to us,” he said. “We think an opportunity is about to open up for us right now.”
Kwan said the company expects to start deals between the second half of this year and next year, and is looking primarily at commercial properties in Shanghai and Beijing.
This bargain hunting is not necessarily a sign that the market is heading for a full recovery.
“What we've observed is that the owners [have] “They're giving us some of the same opportunities, some of the same portfolios, at deeply discounted prices every quarter,” he said. “So that gives us a general sense that it's going to be a while yet before we see a bottom.”
“We're still very positive on China's long-term prospects given the population size, demographics and consumption,” Kwan said. “Right now China is getting into an area of over-adjustment where people may miss out on an opportunity to acquire a really well-located, good quality asset that will be successful, maybe not in the next two or three years, but at least in the medium term.”
Hong Kong-based Swire Properties said in a report last month that it plans to double its total floor space in mainland China by 2032. It currently operates Taikoo Li-branded luxury shopping facilities in Beijing, Shanghai and other major Chinese cities.
“In mainland China, foot traffic has improved significantly since pandemic-related restrictions were lifted, with retail sales in most shopping malls exceeding pre-pandemic levels. Our office portfolio has proven resilient despite the weak office market,” Swire CEO Tim Blackburn said in the report.
Looking ahead, the company predicts that 2024 will be a “year of stability” for retail demand.